Measure
Digital Services Tax
The measure
The government will introduce a new 2% tax on the revenues of certain digital businesses.
Who will be affected?
Businesses with annual global revenues of at least £500m and annual UK revenues in excess of £25m where those revenues arise from the provision of social media platforms, online marketing platforms or search engines and those revenues are linked to the participation of UK users. It is stated that there will be exemptions or reliefs for businesses that generate losses or have very low profit margins. Notwithstanding this the measure is expected to raise £400m per year by 2022/23.
When will the measure come into effect?
The tax will apply from April 2020. The government will consult on the detailed design of the rules and legislate in Finance Bill 2019/20.
Our view
While understanding the pressure to act to ensure that the corporate tax system is sustainable and operates appropriately across all types of business, a global solution to the taxation of the digital economy, supported by the OECD and G20, would seem more likely to lead to a long term, sustainable position than unilateral action. As such the government’s commitment to participate in ongoing discussions at an international level and to only apply the new tax until an international solution is in place is welcome.
Contact
Simon Cooper
Director
Business Tax Policy Lead